Comments from Columbia University Professor

10 February 2016

Further comments on the FinCEN website regarding the agency’s handling of the FBME case were submitted by Sharyn O’Halloran, George Blumenthal Professor at New York’s Columbia University. In her letter sent to FinCEN and put into the public domain Professor O’Halloran explained that her specialist area is the study of US administrative processes, regulatory powers and oversight functions.

“An agency like FinCEN has extensive expertise in foreign and domestic white collar crime, and thus must be afforded some bureaucratic discretion,” she wrote. “However, this discretionary authority should not permit the agency to pursue its own policy goals contrary to the public interest.

“Certain aspects of this case indicate the agency is pursuing its own agenda, rather than the mandate set by Congress. From public court filings and comments, it is apparent that FinCEN has violated the Administrative Procedure Act (APA) in determining its course of action against FBME. More troubling, it appears that several of FinCEN’s actions against FBME border on unconstitutional takings.”

To prevent this recurring she called for the enactment of strong procedural controls “… to prevent violations against other financial institutions”

Professor O’Halloran added that FinCEN has been remiss in evaluating evidence presented to it and in providing this information to FBME, a violation of the APA. “FinCEN appears to have assigned insufficient weight to the steps taken by FBME to remedy and improve its internal controls. FinCEN also seemingly disregarded the findings of independent auditors Ernst and Young and KPMG that the bank was compliant with international and domestic AML standards. In addition, the agency made erroneous statements regarding the timing and size of past fines imposed on FBME.

“An agency with significant discretionary power cannot afford to make rudimentary mistakes. In exercising its discretionary rulemaking authority, FinCEN is required to meet evidentiary standards and refute those sections of the record it disagrees with. It cannot simply ignore, fail to disclose or gloss over inconvenient facts.”

She added, “When applying extraordinary measures, such as the prohibition of fundamental banking activities permitted under section 311 of the USA Patriot Act, FinCEN must develop and implement transparent and accountable rulemaking procedures that comply with regulatory standards when evaluating banks”.